KSK Energy - Fuel cost and aux consumption impact performance::Emkay

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KSK Energy

Fuel cost and aux consumption impact performance

HOLD

CMP: Rs112                                        Target Price: Rs110

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n     Q411 conso. PAT of Rs377mn was below est. - mainly due to higher fuel cost (Rs3.4/unit vs our assumption of Rs2.9/unit) and aux consumption (21% vs our assumption of 13%)

n     We gather that recent SLC meeting has taken up coal supply issue of Wardha Warora but it is still not clear as to at what price (cost plus, MOU or linkage basis) and qty

n     MSEDCL took more power in Q4FY11 (Wardha PLF at 80%) but at lower price (Rs3.9/unit). From 1st May, Reliance infra is supposed to buy 260MW at Rs4.85/unit as per MERC order

n     Assuming supplies from CIL on linkage by Q212, we assume avg. fuel cost of Rs2.0/unit in FY12E for Wardha. Lower FY12E/FY13E EPS by 10%/6%; Maintain Hold - coal supply for Wardha/Mahanadi & Reliance infra contract remains key